Systems of engagement? Ask PepsiCo's CEO what she doesn't know

Profile picture for user gonzodaddy By Dennis Howlett July 1, 2014
Summary:
The current buzz around systems of engagement is shortsighted. Ask PepsiCo about responding to macro trends they don't always understand. It requires transformation of a kind that quick fixes will not not meet.
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Systems of engagement meet systems of record - magic CRM?

A piece I saw on LinkedIn by Chris Ward had me head scratching. He attempted to unpick the topic of systems of engagement (SoE) largely through the lens of two dimensions: a conversation with SAP supported by the fact Paul Greenberg considers this an important part of the CRM landscape. Let's deal with the latter first. Contrary to what Ward said about Greenberg giving SoE a 'seal of approval' - he has done nothing of the sort. Greenberg merely recognizes SoE as part of the CRM landscape. To be precise, he says:

It is (or should be) the key element of all customer strategies at companies as they continue their march through the 21st century, though as Graham Hill rightly points out, a customer focus, while a part of what makes a company successful, is not a guarantee of it.

Now turning to the former, SAP's Jamie Anderson is reported to have said:

“When we were putting in CRM systems back in the day, they offered a convenience for the customers,” he states. “They allowed banks, utilities, telecommunications providers to trade out of office hours. It was a tremendous convenience to customers, because it was all built around them. At the turn of the millennium, CRM systems were very much a system of engagement."

I know Anderson quite well through digital interactions and what Ward failed to point out is that these references are in the context of the call center. I don't remember that Valhalla, does anyone else? I DO remember a time when I could pick up the phone and speak to a human with whom I likely had some sort of relationship. That's a very different thing. Today? If you're like me then you probably dread picking up the phone to any major service provider because you just know you're going to be answered by a robot. Moving on, Ward then meanders through various problems associated with SoE that do little more than allow Anderson to pitch SAP's position concluding:

While the definition of engagement may still be up for grabs, the premise is evidently bigger than CRM, and requires a rethink of how your business understands its customers before they make first contact; and how you guide them through the customer journey once they do. That’s likely to strike fear into many an organisation, but Jamie Anderson believes that the need for better customer engagement will ultimately mean the right companies rise to the challenge...

Did we learn anything new? Not really and in that sense it was an opportunity missed but Anderson's last quote got me thinking:

“Ultimately, a brand that’s easy to do business with and is transparent, trustworthy, well they’re halfway there, essentially. Think about it from the customer’s angle; what they’re trying to achieve when they walk into your store. Understand why they’re there and start to map the journey."

Multi-dimensional shopping

What is it that people do when they go shopping? It seems to me that shoppers fall into many categories. I think about my (rather large and extended) family and see at least four broad shopping types:

  1. Those who consider shopping a pastime,
  2. Others who can't wait to get in and out of the supermarket but will spend countless hours pawing over clothes,
  3. Those who research online, check out products in the store and then search online for the best deal,
  4. Those who routinely graze and then wonder about the crap they've acquired.

I could never bucket these behaviors and label family members as such because human behavior depends in part upon context. I might be willing to say that Person A: is more likely to behave like the person described at (2) on most days but that's about it. During holiday periods for instance, I see all four behaviors rolled into one. At other times I will see one or two behaviors over the course of several days. All of which makes sweeping statements about the importance of SoE interesting but ultimately flawed. See the exchange below as a conversational starting point.

With apologies to Holger Mueller for picking on him this week ;) These debates will go on for some time to come in large part because they fit into the current landscape of analyst discussion but I suspect they miss a fundamental question. All these discussions assume that retailers understand broader trends and buying patterns. That's not easy either and what's most interesting is not what we know or think but what we don't know or understand.

What we don't know

For this part of the discussion I turn to a video conversation (see below) between Indra Nooyi, CEO and president Pepsico and David Bradley, owner of The Atlantic. The whole video runs more than two hours but the piece you need comes at the beginning and runs a total of 27 minutes. The time investment is well worth it.

During the conversation, Nooyi explores the role of women in leadership, a whole topic on its own, where she concludes 'We're screwed' but then she also talks extensively about the transformation that PepsiCo has been undergoing for some years. In several places Nooyi makes some startling revelations. For example, in talking about the change in preferences among food buyers for products that are more nutritionally focused, Nooyi repeatedly points out in several places that 'We don't know why this is happening.' In talking about the move away from artificial sweeteners, Nooyi expresses her lack of knowing why that happened in quizzical terms. Even so, PepsiCo's leadership had the foresight to respond by making the need for change a large scale transformation project. The strategy included acquiring businesses like Tropicana that are more focused on the nutritional value of products than PepsiCo was at the time. It meant instilling new values into the organization and changing tried and tested product specifications. In explaining her strategy, Nooyi touches upon extraordinarily important topics for the 21st century business. My reading:

  1. It really doesn't matter if tastes or buying patterns are changing, the only thing you need to know is that they are and the impact this will likely have on your ability to build and maintain a sustainable business.
  2. How a company responds to changes in customer preferences is rooted in its internal approach to change. Nooyi makes the point that internally, managers viewed past success and saw no reason to believe things would be different. Although she doesn't say so directly, disavowing them of that delusion was critical to achieving current success.
  3. Having a rallying cry around change can have a cathartic impact. PepsiCo chose to talk about Performance with Purpose. Much more than a catchphrase, this is about resetting the business in its entirety. In PepsiCo's case you can see the passion needed at the very top of the business to make this a reality, even when faced with institutional resistance.

Verdict

  1. We can tinker with how we engage with customers all day long, we can tweak how we respond to Twitter and Facebook negativity until the cows come home but I very much doubt these actions will lead to the kinds of change needed for the building of 21st century business. Interesting? Yes. Central? No.
  2. It all starts on the inside. In a past life I undertook a lot of corporate rescue work. In those cases where there was something to be salvaged and built upon, success was routinely predicated upon one thing: top management's ability to instill a viable vision into which people were prepared to buy.
  3. Change doesn't require perilous circumstances in order to succeed but it is a strong motivator. The knowledge that PepsiCo might end up an investment cash cow was enough of an incentive for Nooyi to change course.
  4. What we don't know but can infer from the signals around us is often far more important than trying to shoehorn or influence changes in customer behavior and attitude based upon the here and now.
  5. Successfully executed transformational change radiates outwards so that the Band-Aids of today are less relevant than the obvious expression of brand promise. Companies still need to listen and be attuned to customer needs and desires but that is only a small part of a much larger portfolio of activities that actively embraces every stakeholder.
  6. There are no quick fixes. PepsiCo is still on a journey that started seven years ago.